A nasty rivalry between US and Middle Eastern airlines has been all for naught

America's big airlines have been waging a campaign to get the US
government to put pressure on Middle Eastern rivals that are
stealing away international travelers.

It has, at times, been fun to watch: Rarely are corporate CEOs
as outspoken as Delta's Richard Anderson was when he brought
up 9/11 as a reason for the US to push back against Arab
competitors. (Qatar Airways' chief has been no less colorful,
recently calling Delta "wicked.")

But the US carriers just suffered a big setback in their efforts.

The airlines want the US to reexamine bilateral agreements —
called Open Skies Agreements — that govern air travel between the
US and Qatar as well as the United Arab Emirates. American,
Delta, United (dubbed the US3) claim that Emirates, Etihad, and
Qatar Airways (dubbed the ME3) have received more than $42
billion in subsidies that violate the terms of those agreements.
The ME3 have repeatedly denied these allegations and have pointed
to their audited financial reports as evidence of their
sustainability as businesses.

Represented by a lobbying group called the Partnership for Fair
and Open Skies, the US3 were seeking formal consultations between
the US and the governments of the UAE and Qatar over the issue.

But the Obama administration has told them that this won't be
happening, according to a person with knowledge of the situation.
Instead it is going to hold informal diplomatic talks with the
UAE and Qatar later this summer.

The Partnership is spinning this as a win

"We appreciate how seriously the United States government has
taken the issue of massive subsidization of the Gulf carriers,"
the group said in an emailed statement to Business Insider.
"Discussions between our governments are an important step
forward."

Sure, it's better than nothing.

But this is really a victory for Etihad, Emirates, and Qatar,
which are never going to budge on the assistance they give their
airlines, and the key to understanding why is the differing roles
airlines play abroad.

In Qatar, the UAE, and many countries around the world,
investment in the national airline is an important part of an
economic development strategy. For these nations, airlines serve
as the de facto face of the country. That's in addition to the
the airline's ability to drive tourism and investment dollars to
the country.

As a result, the success and flawless execution of the airline is
not measured just in terms of profitability, but also how it can
further the nation's goals of becoming a financial hub or a
tourism destination.

In many respects, airlines in the US once saw things in a very
similar way. During what we now call the "golden age of
commercial aviation" back in the 1960s, Pan American World
Airways was America's flag carrier. Wherever the airline's Boeing
jets went, so did America. In fact, stepping foot on board a Pan
Am jet was tantamount to stepping foot on American soil.

Today, US airlines operate in a very different environment (with
one caveat being lingering limits on foreign ownership). During
Pan Am's heyday, it was protected from competition by the US
government's regulatory scheme. But since the airline industry
deregulated in the late 1970s, the nation's airlines have been
left to fend for themselves.

But the Persian Gulf's trio of mega carriers along with their
pristinely presented cabin crew along with shiny new fleet of
jets have, in effect, implemented a modernized version of Pan
Am's play book.

And in that respect the discontent among America's three major
legacy carriers is understandable. All three were either bankrupt
or near it less than a decade ago. Through disciplined management
and thanks to a fall in oil prices, they have returned to
profitability. But along the way, American, Delta, and United
have been forced to scrimp on product offerings and have had do
without shiny new fleets of planes.

A Pan Am Boeing 747-121 in
London.AskThePilot.com

Which leads us back to the US airlines' campaign to have the
Obama administration reexamine the Open Skies agreements.

For there to be any significant change in the dynamic between the
US and Middle Eastern carriers, a major shift in the ME3's
funding scheme would have to occur. But with the key role these
airlines play economically and diplomatically for the small
Persian Gulf nations, spending won't stop.